The so-called Information Highway is as confusing for investors as it is for computer novices, Tell us how you figure it all out.

In February we launched a new fund called the Gabelli Global Interactive Couch Potato Fund. It’s up about 5 percent this year. We break our holdings down into two broadly defined areas-creativity and distribution. In creativity we have record companies, like PolyGram and Sony. We own movie companies like Viacom. which now owns Paramount. We own Time Warner, some News Corp., and we’re starting to nibble at Disney. The stock dropped from $48 to $38, and it’s starting to move back up. We also own smaller companies like QVC, BET and Family Entertainment. In Hong Kong we like TVB, a company that has about 6,000 hours of Chinese, Cantonese and Mandarin films. As markets evolve around the world, new vistas are opening up for all these companies. Look at MTV–it’s successfully moved into Europe, to Latin America and now to Asia. Music travels well, and so does filmed entertainment, whether it’s “Eat Drink Man Woman”’ or “Forrest Gump.”

What else looks good?

On the distribution side, we like GCX, the theater chain that was spun off from Harcourt General. It’s at $29, has $100 million in cash, no debt, a good business. There’s United International Holdings, which operates overseas cable systems out of Denver. It’s a good way to play the growth of cable around the world with American management and American financial know-how. We own Tele-Communications Inc. and Comcast. We have some odd lots in companies that package data or package entertainment. Examples would be the online services–America Online, Sierra Online and H&R Block, which owns CompuServe. We have another 10 percent of our assets in traditional broadcasters, like CBS and Capital Cities/ABC. We also have about 15 percent of our holdings in the telephone companies. One we like is BC Telecom Inc., which provides phone and cellular service in Vancouver, Canada. It’s a real bargain at 825. Its traditional long-distance and local phone businesses alone are worth that, so you’re getting a $1 billion cellular business for free. It’s a really cheap play-a value haven.

You haven’t mentioned the Baby Bells, which have become enamored with the new media age. Can my grandmother trust these stocks?

Those stocks are now for grandmas who want to ride a motorcycle. They’re aggressive. Stocks like Nynex and US West really give you a sprinkling around the world. They’re involved in telephone in Asia and cable in England. They’re still sort of ham-strung by outdated regulations, but that could change as the Republicans take control of Congress. It’s premature to speculate at this point, though.

Let’s talk takeovers. You’ve made a mountain of money on them over the years–most recently when Viacom and Barry Diller battled over Paramount. Will the deluge of deals continue?

General Electric’s proposed takeover of Kemper last summer sounded a bell–it made it OK to do hostile deals. When historians look back, you’ll see that that signaled a new wave of takeovers in the United States. In the 1890s you had the railroads and the oil companies and the steel industries; in the 1960s it was the conglomerates; in the 1980s it was the leveraged buyouts. But in the 1990s you’re seeing strategic global acquisitions. They’ve come from the Swiss. You’ll see a whole bunch from the Germans now that their economy’s getting better. The English are going to be in. The dollar is down, interest rates in Europe are down and these companies are becoming emboldened. Companies in electronics and industrial equipment, media–they’re going to be looking to America’s market. But you’ll also see more major strategic acquisitions in the U.S. from the media giants and the telephone giants. It’s a media mating game–everybody’s looking at everybody. Takeovers are going to be very prominent in the next few years and will be a great way to earn returns.

Some names, please?

We think Media General is going to be taken over. It owns the Tampa Tribune, the Winston Salem Journal, the Richmond Times-Dispatch, 40 percent of the Denver Post and has 200,000 cable subscribers. It’s at $28, and the newspapers alone are worth that much. So you get the cable subscribers and other assets for free. We think it’s worth $80 to $100. They fought off a hostile takeover six years ago. The next time around, they’ll be vulnerable. Our clients own 80 percent of Media General. Some others? Larry Tisch will sell CBS. It’s just a question of to whom and how. GE, I think, is going to do something with NBC. It’s just a question of with whom and at what price.

How do you sniff out companies that will become turrets?

Sometimes it’s a management succession. In the case of Park Communications, which owns newspapers, TV and radio stations and was sold last month to private investors, it was fairly obvious. Mr. Park was a wonderful individual, but he was 88. You knew at some point he was going to sell off his shares. Its stock is up 50 percent since March. How do we know that Larry Tisch is going to sell? That’s our belief in the flow of dynamic.s. He realizes that technology in the marketplace is moving faster than his psychic framework will allow him to participate. In general, when a stock is undervalued, something is going to fill the spread between the value of the company and the stock price. It’s like a thunderbolt from the sky-it happens because there are conditions prevalent in the environment.

Is the rest of the market in for more stormy weather?

Coming into 1994, I felt it was going to be a year like walking through the mud in the stock market. We were very bullish on earnings, but thought rising interest rates would crimp the growth in P/E multi-pies, and that stocks wouldn’t be doing a lot. Looking ahead, we see interest rates continuing up sharply-probably 1 percentage point on the short end and haft a point on the long end. You’re seeing commodity inflation, bottleneck inflation, and you’re beginning to see labor inflation. Workers are saying, “Hey, I’m working overtime. It was OK for a year or two, but it’s time to hire somebody else.” I think you’ll see inflation move up to the 5 percent level. You’ll continue to have concern over the enormous amount of money that’s flowed into mutual funds–now people are starting to back off into money-market funds. It’s not an environment that’s going to help the market as a whole go up. Basically, I think we’re going to get paid for being stock pickers.